The Israeli economy is expected to grow by 3.5% in 2013, according to the Finance Ministry's official growth forecast for the next two years released Sunday evening.

The updated forecast, which will serve as the basis for the next state budget, is 0.5% higher than estimates voices by Treasury officials six months ago and the Bank of Israel's recent growth forecast.

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According to the new forecast, in 2014 the economy is expected to grow even more – by 3.9%.

The Treasury's forecast for 2013 is even more optimistic than an estimate voiced by Bank of Israel Governor Stanley Fischer's just last week. In an interview to CNN international business correspondent Richard Quest, Fischer said that in light of the renewed financial crisis in Europe, he expects the Israeli economy to grow by 3% next year.

The central bank is expected to release its updated growth forecast next week, along with the interest rates for January.

A senior Treasury official estimated Sunday evening that part of the economy's growth in the next two years would come from natural gas
proceeds, as commercial production is set to begin ahead of May 2013. Natural gas proceeds are expected to contribute some 0.8% to the 2013 growth rate, and about 1% in 2014.

According to the official, natural gas proceeds will have a positive effect on the State's income tax. Although in the coming year the State's income from natural gas is expected to grow by less than NIS 1 billion (about $260 million), as of 2014 it will grow significantly.

The detailed economic forecast, which also includes additional economic indicators, such as the income forecast, the size of the state budget deficit and the unemployment rate, will be released by the Treasury ahead of the 2013 budget discussions – after the formation of the new government.